Elon Musk's xAI is draining SpaceX's cash, with little to show for it

By William Gavin

SpaceX's AI division, which houses the Grok platform, generated $818 million of revenue in its last quarter, resulting in an operating loss of $2.47 billion

Elon Musk has championed xAI as an alternative to OpenAI and Anthropic. So far, it's well behind its rivals.

Elon Musk is going all-in on artificial intelligence, but his xAI has been gobbling up SpaceX's cash, diverting attention away from the rocket-launch and satellite operations.

Musk founded xAI in early 2023 before officially announcing the startup's existence in July of that year. Between then and the end of 2025, xAI booked more than $18.8 billion of capital expenditures, according to a widely anticipated securities filing that SpaceX made on Wednesday connected to its planned IPO.

SpaceX added another $7.7 billion of capital expenditures to that total between January and March as it builds its third data center, Macroharder, which is expected to cost $20 billion.

That massive spending has made xAI the most capital-intensive aspect of SpaceX's business over the last few years, according to the securities filing. SpaceX's connectivity division required a little more than $11.4 billion in capex from 2023 through March, while the space business needed $8.4 billion in capex.

Its costly needs are a big part of why Musk in February had SpaceX acquire xAI, which also owns the social-media platform X. SpaceX has warned that it will take years of building before it can sustain positive adjusted profit for its AI division and that it may not grow or deliver returns as the company expects.

SpaceX in March also opened a $20 billion loan facility that it used to repay a series of xAI loans. Altogether, it has a little more than $29 billion in long-term debt.

There "can be no assurance that the returns on our AI investments will be adequate to justify the capital deployed," SpaceX said.

See more: SpaceX has a lot riding on its imminent Starship rocket launch

Last year xAI generated $3.2 billion in revenue, a 22% increase, while the cost of that revenue grew 29% to nearly $2.2 billion. After other expenses - such as $5 billion in research-and-development costs - xAI recorded an operational loss of $6.36 billion in 2025, up 307% from 2024, according to its regulatory filings. That helped bring the overall company to a $4.9 billion net loss in 2025.

SpaceX has said that its ability to scale AI relies on infrastructure, which is "increasingly constrained by the availability of power at economically feasible prices, long lead times, availability of materials, and changing regulatory requirements." That hasn't stopped it from selling computing capacity to a rival AI lab, a move that some have said underscores the lack of demand for xAI's Grok.

Anthropic is paying SpaceX $1.25 billion a month until May 2029 to use its data centers. Both companies have an option to back out of the deal, which could cost Anthropic $45 billion by the time it expires. By the end of this year, Anthropic could owe xAI as much as $10 billion, or more than xAI has generated since it was formed, presuming a May payment is included.

Initially, Anthropic said it would be renting compute capacity from only the Colossus I data center but on Wednesday added the Colossus II facility to its deal. Musk had earlier said that SpaceX had moved its AI training to Colossus II, so the companies may be splitting that capacity. SpaceX said it expects to enter similar deals with additional companies.

Anthropic, unlike SpaceX, is desperate for more compute capacity. Its CFO, Krishna Rao, said recently on the "Invest Like The Best" podcast that the SpaceX deal is "just one example of us ... looking for near-term compute wherever we can get it." That's because Anthropic is facing what it has called "record" demand, while SpaceX's AI tools have remained relatively unpopular.

Read: Elon Musk ditched California, but the state will get a much-needed win from SpaceX's IPO

SpaceX said it has more than 1.3 billion accounts across xAI's Grok and X.com platforms as of March 31, including 550 million monthly active users that create some 350 million posts each day. Just 21% of its MAUs have used Grok's AI features as of March, or 9% of overall accounts. About 6.3 million accounts have subscribed to a premium plan on X.

Grok has reportedly been unpopular among U.S. federal agencies, collectively SpaceX's single-largest customer. Additionally, just 1.9% of U.S. businesses that pay for AI models, platforms or tools in April made payments to xAI, according to Ramp. Its spot in the market has been stagnant for the past three months, Ramp's data show, and xAI's share peaked at 2% in January.

That lack of enthusiasm has been clearly reflected in its finances. SpaceX's AI division generated $818 million of revenue in the March quarter, a mere 12.5% increase compared with a year earlier. At the same time, it took an operating loss of $2.47 billion, a 163.8% rise from the year-ago period.

And on the AI leader boards, the Grok family of models has fallen behind rivals. SpaceX may spend up to $60 billion in an all-stock deal to acquire the AI startup Cursor, which could help it train better models.

Meanwhile, Anthropic in April said it has more than 500 companies spending over $1 million on an annualized basis and business subscriptions are skyrocketing; OpenAI now says enterprise customers account for more than 40% of its revenue. And Similarweb data show website traffic to Grok behind that of OpenAI's ChatGPT, Claude, Google's Gemini and DeepSeek's models.

See more: Has Google lost its AI edge? How its 'unexciting' strategy could actually pay off.

Anthropic, according to the Wall Street Journal, is on track to report its first quarterly operating profit against revenue of $10.9 billion in the second quarter. It generated $4.8 billion in sales in the March quarter, several times more than what xAI recorded, the report said. Anthropic's computing-power cost per dollar is also on the decline, a sign that it is becoming more efficient.

"I hope that 80 times growth doesn't continue because that's just crazy and it's too hard to handle," Anthropic CEO Dario Amodei said at a conference this month. "I'm hoping for some more normal numbers."

OpenAI, while dealing with its own fair share of problems, is also ahead of SpaceX on the AI front. In January, OpenAI said it is generating $2 billion in revenue per month, and the business is expected to bring in $33 billion this year, according to HSBC estimates.

At the same time, though, the company, has reportedly fallen short of its own revenue targets and has massive spending plans. OpenAI is committed to spending as much as $1.4 trillion on computing resources over the next several years, CEO Sam Altman said last October.

On Tuesday, OpenAI launched a service through which customers can purchase "guaranteed" access to AI compute for up to three years. "As models get better, we expect that the world will be capacity-constrained for some time," Altman said in a statement.

See more: OpenAI could steal SpaceX IPO's thunder, with Sam Altman filing as soon as Friday

-William Gavin

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05-21-26 1527ET